Don’t stop saving to pay off home loan1 min read . Updated: 20 Jan 2020, 11:03 PM IST
You need to check the cash flows or assess if you can provide for the EMI in addition to your monthly savings.
I am a 31-year-old salaried employee and I earn ₹8 lakh per annum. I want financial advice about my investments. I have systematic investment plans (SIPs) in SBI Focused Equity Fund ( ₹2,500), SBI Small Cap Fund ( ₹500), SBI Technology Opportunities Fund ( ₹2,000), SBI Magnum Taxgain ( ₹2,500), Mirae Asset Tax Saver Fund ( ₹1,000), Axis Focused 25 ( ₹2,000), Motilal Oswal Long Term Equity ( ₹1,000) and Kotak Standard Multicap ( ₹1,500). I also have lump sum investments in Aditya Birla Sun Life and ICICI Prudential Balanced Advantage. My goals are: marriage in two to three years ( ₹3 lakh), house in five years ( ₹25 lakh) and retirement ( ₹3 crore).
The current savings rate of ₹13,000 per month takes your annual saving rate at ₹1.82 lakh. There is a marriage goal within two to three years, which will more or less exhaust the complete savings till that period.
You also plan to buy a house in five years. Assuming you maximize the housing loan, you will still be required to pay 10-20% as down payment and the balance can be provided by the lender. Assuming 90% as loan on a ₹25 lakh property at an interest rate of 8.5%, the monthly EMI for a 15-year loan comes to be ₹22,160. You need to check the cash flows or assess if you can provide for the EMI in addition to your monthly savings. The annual savings rate also needs to increase every year to achieve the targeted retirement corpus. Your fund selection is good for long-term growth.
However, as you have a few short-term goals, it would be prudent that a part of the corpus is invested in debt-based investments. You are currently fully invested in the equity asset class.
Surya Bhatia is managing partner of Asset Managers. Queries and views at firstname.lastname@example.org